Please stand by. We're about to begin. Good afternoon, ladies and gentlemen. Welcome to the Sweetgreen Q3 2022 Earnings Conference Call. At this time, all participant screens are in a listen-only mode, and please be advised that this call is being recorded. After the speakers' prepared remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star one on your telephone keypad. If you would like to withdraw your question, simply press star one again. Now, at this time, I'd like to turn the conference over to Rebecca Nounou, Head of Investor Relations. Please go ahead. Thank you, and good afternoon, everyone. Here with me today are Jonathan Neman, Co-founder and CEO, and Mitch Reback, Chief Financial Officer. Before we begin, we have a couple of reminders. Our earnings release is available on our website at investor.sweetgreen.com. During this call, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company's SEC filings, including the section titled Risk Factors in our latest annual report on Form 10-K filing and subsequently filed quarterly report on Form 10-Q. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. Additionally, we will be discussing certain non-GAAP financial measures, which are in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest U.S. GAAP measure can be found in this afternoon's press release available on our IR website. With that, it's my pleasure to turn the call over to Jonathan to kick things off. Thank you, Rebecca, and good afternoon, everyone. As we near our first anniversary as a public company, I want to begin by offering my gratitude to our incredible team members who power our mission of building healthier communities by connecting people to real food, adding the sweet touch with every customer interaction. For the quarter, we reported sales of $124 million, representing 29% year-over-year growth, and same-store sales growth 6%. We opened 10 restaurants in the quarter. Total digital sales represented 60% of our total Q3 revenue, with approximately two-thirds of those sales coming via our own digital channels. AUVs were $2.9 million, and restaurant level margins were 16% for the quarter. Our adjusted EBITDA loss was $6.8 million in the third quarter, narrowing from a loss of $14.1 million this time last year. That figure has improved each quarter this year, and we continue to demonstrate improvement on our path to profitability. While this has been a challenging year for the industry, we are proud of how we have navigated the macro environment and believe that our high-quality product offers excellent price value. We are relentlessly focused on financial and operational discipline as we steer through uncertain times in the world ahead. Our strong value proposition starts with the help of our 200 sustainable farmers, producers, and distribution partners. We share a network of partners that supply some of the most highly regarded restaurants in the United States. The vast majority of what we source is local or organic, and our passionate team members make food from scratch every day in each restaurant. This creates the difference that our customers can taste. We have a bowl priced under $10 in all our markets, and we've held our core menu price flat since the beginning of the year, while the majority of our industry has raised prices more than once this year. During our 2-plus years in the pandemic, we drove best-in-class digital acquisition and sales while simplifying our operating model. We continue to deliver value through technology by meeting customers wherever they are, believing technology should enhance the human experience, not replace it. Now that the world is opening up, we are going back to basics, relaunching the playbook that we call Intimacy at Scale that helped us build a best-in-class brand over the past 15 years. I'd like to highlight a few of the ways we build Intimacy at Scale. First, we take a local approach to building community connections with local chefs, farmers markets, artists, community partners, and creators so that with every opening, we become an authentic part of the community. Two, we create a great experience in our restaurants and have begun to retrain our team members with a focus on customer hospitality. We add the sweet touch. It's one of our core values, and it's how we delight our customers with every interaction we have with them. Three, we offer fast service without compromising freshness. By focusing on improving throughput through refining our labor model and training, we believe we can drive incremental transactions and better customer satisfaction. In addition to driving operational excellence and reintroducing our Intimacy at Scale playbook, we are committed to driving long-term sustainable growth and becoming a profitable national brand, even with the increasing uncertainty of the macro environment. As a reminder, our strategy has four pillars. One, expand and evolve our footprint in new and existing markets to connect more communities to real food. Two, enhance our digital experience with a focus on own digital relationships, allowing us to add new customer channels, drive frequency, and increase restaurant volume. Three, solidify our brand as the industry leader and inspire consumers to live healthier lives through reimagining fast food. Four, create five-star team member experiences and make Sweetgreen the employer of choice. Let me share a few highlights from the quarter on each of these pillars, starting with our footprint. In Q3, we opened 10 restaurants, ending the quarter with 176 restaurants. Late in the quarter and into Q4, we opened 5 restaurants in the upper Midwest: Minneapolis, Detroit, and Indianapolis. To launch these new markets, we collaborated with local artists, small businesses, influencers, and chefs. Thanks to our Intimacy at Scale playbook, while early, these stores are exceeding expectations and tracking to an average AUV above $3 million. We have, however, a small cluster of Southeast restaurants that are underperforming to our standards. These restaurants opened during the pandemic, and as a result, we were not able to execute our playbook. We have begun the process of re-energizing these restaurants through community connections. We are starting to see positive responses and week-on-week revenue growth. We are confident in these markets as we have nearby restaurants that are already meeting or exceeding expectations. Last month, we opened our first digital-only pickup kitchen in the Mount Vernon area of Washington, D.C., which was a relocation of our CityVista restaurant nearby. Customers have been receptive, and the store was filled with new customers downloading our app to experience the new model. Future pickup kitchens have the potential to unlock additional markets with smaller square footage needs, lower build-out costs, and improved return on invested capital. Our Mount Vernon restaurant will provide learnings for our future restaurants powered by the Infinite Kitchen. As you know, we acquired Spyce, the restaurant powered by automation technology last year. We were in Boston a few weeks ago visiting the team. I cannot be more excited with the progress they've made. We can share that we will be opening two restaurants sometime next year that will feature our automated production line we call the Infinite Kitchen. These restaurants will serve our food with even better quality, perfect portioning, faster speed, and will create a more consistent customer experience, all while elevating the role of our team members. We are confident that automation will play a major role in elevating the experience for customers and team members, but will also help us create a more profitable and scalable model. We look forward to sharing more about this transformative technology with you in future calls. Next week, we will be opening our first pull-through in Schaumburg, Illinois. With 60% of sales coming from digital channels, we are well-positioned to have another profitable and scalable format in our toolkit as we look to connect more people to real food. Enhancing our digital experience with a focus on owned relationships continues to be a priority for us. We believe the launch of a loyalty program in 2023 will lead to customer incrementality and engagement, and is especially important to have in this recessionary environment. As a reminder, our Sweet Pass subscription trial in Q1 saw Sweet Pass users place an additional five orders on average during their 30-day trial, almost tripling their frequency and more than doubling their spend as compared to the average monthly frequency in Q4 of 2021. In July, we launched our rewards and challenges feature with an aim to drive frequency and spend through a cohorted gamified experience. Looking back on a 90-day period, customers who opted into at least one of our digital challenges doubled their frequency and spend as compared to digital customers who did not opt into a challenge. We will continue to test and implement new challenges throughout Q4 as we iterate and learn towards a new loyalty program. Both Sweetpass and rewards and challenges were piloted as potential components of a future loyalty program. Given the level of customer engagement with both pilots, we believe our program will strongly resonate and be a powerful growth lever later next year. We continue to focus on the growth and profitability of our B2B channels as offices return. In addition to Outpost, we are in the early stages of rapidly growing a new catering channel. We've begun piloting catering in 20 select stores with promising initial results. Average order values to date exceed $500, and weekly sales have tripled from start to end of Q3. Over the coming months, we will add additional markets to our pilot and begin marketing activity to drive awareness. We see real growth opportunities with Outpost and catering as return to office trends upward and group gatherings increase. Our brand's mission is to expand access to real food. We expand access by adding channels, expanding our footprint, and broadening our menu. Yesterday, we launched a crispy rice treat dessert nationwide. It's our version of the beloved classic treat that honors our food ethos as it is free of highly processed preservatives and any refined or hidden sugar. We created this treat with our Chef in Residence, Malcolm Livingston II, renowned pastry chef who has worked at restaurants such as Per Se and Noma, the five-time winner of the title World's Best Restaurant. Across California, we're also testing new heartier offerings, grain bowls, and plates. The test features our delicious new protein currently in testing, organic turkey meatballs, which have 60% less carbon emissions than a traditional meatball. Finally, starting this Thursday, we will be testing our first ever plant-based protein, Meati, at our Culver City Food Lab to address customer desire for a high-protein vegan option. For one month, customers can try this nutrient-rich mushroom root protein in their bowls or order the new miso Meati bowl. We are proud to be working with a partner who shares the goal of creating a positive, sustainable impact on the planet. Our team members power our mission and build the brand with each customer interaction. We continue to innovate to make their jobs easier, as well as invest in training and development. This leads not only to increased employee satisfaction, but also better run restaurants. Given a number of factors, namely a historically tight labor market, there are opportunities to improve staffing across many of our restaurants. While recruiting has become somewhat easier than earlier in the year, and we remain 95% staffed, call-outs have had an impact on throughput and operating hours in many locations. Our data shows that employees who are scheduled to work 30 hours or more call out less and have higher tenure than those who are scheduled to work fewer hours. In response, we are working to shift our staffing models. On the hiring front, we launched a new applicant tracking system this quarter. The rollout of our new ATS has reduced our time to hire by almost half. While we have seen the hiring environment get easier, industry demand for talent is still high. Training remains critical to our success in implementing our Intimacy at Scale playbook, especially as the majority of team members joined during the pandemic when we had to switch to digital-only operations. We've refocused our training on customer hospitality as the world opens back up. Finally, we continue to leverage automation and digital tools to free up time so our employees can do what they do best, connecting with our customers. This includes our newly rolled out proprietary cold prep tool, which uses machine learning to generate a list of what to prepare and how much by incorporating multiple data points and a real-time algorithm to predict future consumption of ingredients. Early feedback from our teams is overwhelmingly positive. We are in the early innings of creating and defining a category of healthy, convenient, and delicious food. We have tremendous white space across the U.S., a national brand with a cult-like following, and a proven playbook. We are well capitalized and continue to have a relentless focus on financial discipline while enabling us to invest in growth to drive our business for the long term. I want to thank the whole Sweetgreen team for their work and commitment to our mission of connecting people to real food, one customer at a time. Now I'll hand it over to Mitch to review our Q3 financial results. Thank you, Jonathan, and good afternoon, everyone. Total revenue for the quarter was $124 million, up from $95.8 million in the third quarter of 2021, growing 29% year-over-year. This includes same-store sales growth of 6%, reflecting our price increase of 6% taken in January 2022. Since then, we have not taken a broad menu price increase. As stated previously, if our cost of goods and labor as a percent of revenue stayed in line with 2021, we did not anticipate any further price moves in 2022. Our average unit volume was $2.9 million, up from $2.5 million in Q3 2021. Digital revenue in Q3 was 60% of total revenue, and our own digital revenue, that is a transaction made on the Sweetgreen app or website, was 40% of revenue. Q3 total digital dollars grew 22% year-over-year. We opened 10 new restaurants this quarter, ending the quarter with 176. The majority of these restaurants opened in the second half of Q3. We remain on track to achieve our guidance of at least 35 new restaurants this year. To date, we've opened 33 restaurants for a total of 182 restaurants. During the fourth quarter, we made the decision to close 1 restaurant in Texas. Restaurant level margins in the third quarter were 16%, up from 14% in the third quarter of 2021. For a reconciliation of restaurant level margin to comparable GAAP figures, please refer to the earnings release. Food, beverage, and packaging costs were 28% of revenue, which is consistent with the comparable period in 2021. As a percent of sales, we continue to expect that our food, beverage, and packaging costs for 2022 will be in line with full year 2021, which was 28% of revenue. We mentioned on earlier calls, we have seen inflationary pressures build in the second half of 2022 and expect further impacts due to recent weather disruptions impacting tomatoes and romaine in Q4. Labor and related costs were 31% of revenue, an improvement of over 100 basis points from this comparable period in 2021. This margin improvement year over year was the result of price increases and the simplification of our operating model. We continue to expect that labor and related costs as a percentage of revenue will be in line with or slightly better than full year 2021, which was 32% of revenue. Occupancy and related expenses were 14% of revenue, an improvement of 100 basis points from the third quarter in 2021. This improvement is primarily due to the impact of menu price increases. Our G&A expense for the quarter was $41.4 million, compared to $28.9 million in Q3 2021. This $12.5 million increase in G&A is primarily attributable to a $14.6 million increase in stock-based compensation expense, an increase of $1.2 million in public company expenses, and a $300,000 increase in our investment in Spyce. This is primarily offset by a decrease in salary and benefits. Due to the timing of the Spyce acquisition in Q3 2021, the change in Spyce costs was minimal for the quarter. Excluding these items, G&A for the quarter was $20.2 million compared to $23.7 million in the comparable period in 2021. This was a 15% improvement as revenues increased 29%. We expect that we will continue to gain meaningful leverage in our G&A, which is critical for our path to profitability. Our net loss for the quarter was $47.4 million, compared to a $30.1 million in comparable period 2021. The change is primarily attributable to a $14.6 million increase in stock-based compensation and $11.1 million of restructuring charges taken in the current quarter, partially offset by the increase in revenue and restaurant level profit noted above. Adjusted EBITDA for the quarter was a loss of $6.8 million, narrowing the year-over-year quarterly loss from $14.1 million. This improvement is the result of higher sales, improved restaurant level margins, and leverage in G&A, excluding stock-based compensation. As disclosed on our last call, we took steps to manage our corporate overhead costs in the third quarter. We incurred pre-tax restructuring charges of approximately $11 million related to moving to a smaller office and reducing our support center staff by approximately 5%. We ended the third quarter with a cash balance of $381 million. We have a strong capital position that allows us to continue to expand our mission and provide us with flexibility during these uncertain times. I would like to make a few comments now on our third quarter sales. First, the post Memorial Day trends persisted throughout the quarter and into October. Second, we saw an unusually high volume of store closures due to call-outs and repair and maintenance issues affecting some high volume stores. Third, we have a small cluster of restaurants in the Southeast opened during the pandemic, ramping slower than expected. We are revisiting these stores with our Intimacy at Scale playbook. We have long-term confidence in these stores and markets. In light of these trends, we expect to be at the lower end of our guidance we gave in August, with the possibility of our top line being a little short. The external operating environment continues to be challenging, and the world is hard to predict right now. While the macroeconomic environment grows increasingly uncertain, we are focused on doing what's best for the company over the long run. We believe we have the right long-term strategy to scale our mission of connecting people to real food and create an enduring brand. We are committed to driving sales, elevating our customer experience, and maintaining a disciplined approach to margins and G&A to drive the company's path to profitability. With that, I'll turn the call back to the operator to start Q&A. Thank you, Mr. Reback. Ladies and gentlemen, at this time, if you do have any questions, simply press star one. If you do find that your question has already been addressed, you can remove yourself from the queue by pressing star one again. We'll take our first question this afternoon from John Ivankoe of JPMorgan. Hi. Thank you very much. Can you hear me? Yes. Hello. Hi, John. All right. Yeah, hi. Sorry about that. We had a little power burst outside, so I actually lost my phone, and I had to go to my cell phone. We're gonna have a big storm, I guess, in the next day. Sorry about that. The question really is on new unit volumes. Listen, it's not a calculation that we can do perfectly from our seat, but you know, we can try based on last year's average weekly sales and same-store sales. You know, that was a place you know in the model that did seem you know more so than even a comp. I mean did you know seem to you know explain most of the shortfall in the revenue relative to our expectations. You know, I guess I wanted, you know, for you to address, you know, did you see that as well? I mean, is there anything happening? You know, is there more than a handful of new stores that have opened that have been weaker? What would characterize, I guess, you know, the stores that have been slower versus the stores, you know, that are better and, you know, talk about initiatives, you know, and I think you've talked about Intimacy at Scale, but, you know, talk about the different initiatives that you may have, you know, to bring the lower performing stores at least up closer to the system average and, you know, correct what may or may not be a problem that's starting. Thanks. Sure. Hey, John, good to hear from you. To your point, we do have a cluster of stores, mostly isolated in the Southeast, where we have seen a slower start. You know, we mentioned on prior calls about some stores which we had signed right before the pandemic or at the onset of the pandemic, really not anticipating the changes to the demographics and the shifts in traffic. The combination of that, as well as not being able to run our classic playbook, which really has to do, you know, while so much of our business is digital, a huge portion of it is that frontline business of really bringing guests in, educating them about Sweetgreen, giving them that first, you know, that incredible first trial and bringing them back. Then on top of that, you know, part of our playbook has always been how we engage with our communities. You know, there's a cluster of stores opened in the kind of right in the middle of the pandemic where we weren't able to execute this playbook. That's really where we're seeing most of the problem. As the pandemic started to wane, and, you know, if you look at the past openings, specifically the ones in the upper Midwest, they've been incredibly successful. You know, I don't think, you know, we're pretty confident that this is much less to do with the real estate or the market, because in all of the markets where we have problem stores, we have very successful stores. It really has to do with our go-to-market and how we executed that playbook. As we mentioned on the call, we've really begun to reengage on that playbook and are seeing some really nice results as well as using that playbook on new stores. I will also, you know, just talk a little bit about some of the challenges being the labor environment, which we've now seen a lot of, you know, easing in the labor environment. In the depths of the pandemic, that made a lot of the customer experience that we expect challenging. All to say we're very, very focused on just execution, one customer at a time. We think, you know, in our history, we've proven that once people try Sweetgreen, they are very sticky. When stores, you know, start a little bit slower, we've always proven that we're able to ramp these stores when we focus on them. Hey, John, it's Mitch. Hello. It's interesting when we look at the modeling for both the class of 2021 and the class of 2022. We continue to see their year two volume averaging the $2.8 million target that we gave at the time of the IPO. While there have been some stores that have opened softer than we would have liked, we have offsetting in many stores that have opened stronger. Thank you, guys. Thank you. We go next now to Andrew Charles at TD Cowen. Great, thanks. Looking for you guys to expand a little bit more just about that slowdown in May sustaining through October. You know, return to office data looked like it improved a bit post Labor Day, but you know, perhaps wasn't as robust as you guys were thinking original guidance. You know, what else would you kind of attribute it to? I mean, how much of this is more macro versus how much is this more the Southeast dragging down performance and just some challenges on the staffing side or labor side, excuse me. Yeah. Hey, Andrew, good to hear from you. I'll start, and I'll let Mitch kind of fill in. I'd say it's a combination of a lot of macro effects, you know, a lot of the stuff we talked about in the last call, around the slowdown in sales post Memorial Day. Things that we saw around, you know, heightened summer travel, erratic return to office, and just general difference in different traffic trends. Even on the office, while we've seen an increase on certain days, you know, Mondays and Fridays are definitely not the same. Traffic patterns are erratic across the board. You know, beyond that, I think there's some on the execution side. We talked about, you know, the world, you know, our world was all digital during COVID, and the front line was the fastest growing channel for us this year, both year-over-year and quarter-over-quarter. As most of our team members were really new to Sweetgreen, they've never experienced the Sweetgreen of lines out the door and the throughput that we're used to. We're in a lot of ways, maybe say caught off guard by that, and our throughput and customer service really not where we expected it to be. You know, that's been the huge focus over the past couple months, and I can say that we've already seen some green shoots. As we focused on that customer and on that throughput, we're starting to see some really nice gains there. Again, I'd say slight. You know, definitely the macro's not making things easier, but some execution side on, execution stuff on our side as well. Yeah. Andrew, let me just build a little bit on John's comments. As we said on the call in August, what we saw happen post Memorial Day was very unusual in our business. As a general rule, Sweetgreen strengthens during the summer and slows down during the fall. Historically, Monday was our strongest day, followed by the end of the week. What we've seen coming out of the pandemic, or whatever we call the phase we're currently in, some of the consumer patterns have been very different than they were prior to the pandemic. John talked about Monday and Friday essentially being almost an extension of weekends in the urban stores. In addition to which, what we saw was the summer slowdown. We thought part of that was travel, part of that may be due to COVID. It's possible part of that's due to the macro environment. What's very interesting is as we approached fall and hit November, the business reignited, and the same-store sales began to grow double digits again. Again, counter to the historical pattern. Okay. Mitch, maybe just a follow-up question. Just given the sales environment, you're recognizing that November has shown some improvement, but it's only been 7 or 8 days, so obviously you don't want to get too far ahead of yourself. But can you talk about your feeling, your ambitions to turn profitable in first half 2024 now, you know, versus on the prior earnings call? Thanks. I think that is, you know, it's a very, very important topic, and it's one that we spend a tremendous amount of time on at Sweetgreen. I would say in the current environment, our path to profitability is actually more important, not less important than it was, and it's one that we're more focused on than ever. The path to profitability for us is a relatively simple model. It's opening new stores that are successful, driving our restaurant level margins through good control at the store level, and leveraging our G&A expense. We are completely focused on these. You know, we will continue to reassert that in 2023, our losses will narrow significantly, and the company will be profitable on an adjusted EBITDA basis in the first half of 2024. Okay, got it. Still on track. Super. Maybe I can just sneak one more in. Great, thanks. I'd just- Sorry. I'd just say one quick build-up. While the sales may have been a little lighter than we wanted in Q3, we were especially happy that the adjusted EBITDA came in significantly better than the modeling and that the restaurant level margins were strong in Q3. That's helpful, thanks. Mitch, just one maybe follow-up question on that. You know, can you talk about your thinking around the sales and margin impact of the upcoming loyalty program, and in particular, how this is gonna help enhance your path to profitability? Obviously, there's a portion of this where you're giving away a lot more food for free. Well, I think what I would say about that is you're correct that the margin on that marginal sale through loyalty would be at a lower rate than historical. We're really driving the incrementality of the volume to kind of get the AUVs back up and gain more leverage around the box. We believe that it will add both to the top line and the bottom line, although at a lower margin. Very good. Thanks. Appreciate the time. Thank you. We go next now to Jared Garber of Goldman Sachs. Great, thanks for taking my question. Mitch, wanted to come back to maybe some comments that you had made last quarter around working with your sort of landlords in some of the urban markets that I think were open, you know, the units that were open during the pandemic and maybe at the current moment are not necessarily best performers or performing to the same extent that you saw on the top line. Can you give us any update on what those conversations with some of those landlords have been like? Thank you, Jared, for the question. Yeah. Let me first say that you're correct in, you know, that the deep central business district AUVs, particularly in Midtown Manhattan, have not returned anywhere close to their 2019 levels. While they are growing and continuing to grow, they are certainly off the mark they were at before. The profitability of these stores has been impacted by several margin points, and the offset has been 100% in the occupancy line. We are in discussions with a number of landlords in modifying our leases in order to kind of accommodate that structure. The attempt is to move more of those leases from fixed rent to a percentage rent and with a break point at the level in 2019, and we have had some success in that area. Great. Thanks. That's helpful. Then, as it relates to unit growth, I mean, obviously, you know, impressive to see you guys maintain that unit growth guide throughout the year, despite all the macro pressures, and we've seen several companies kind of ratchet down their unit growth expectations for the year. Wanted to get a sense of how we should be thinking about unit growth into next year, and how comfortable you feel with the original guidance that you've laid out during the IPO. Thanks. Hey, Jared. Good to hear from you. We're on track for at least 35 this year, might exceed that by a couple stores depending on how the year ends up. We have 43 leases signed for 2023 already, so we're kind of still targeting the way we think about it is a, you know, cumulative between 2022 and 2023 stores. We've you know, we've modeled 85, and we're on track for you know, 80-85 at least. We feel pretty good about the development targets. On top of that, you know, so first of all, kudos to our development team in this incredibly challenging environment. I'd like to, you know, beyond the number of stores, we've been very focused on the quality of real estate and the sequencing. You know, this year was a year of going wide, opening a lot of new markets. You know, anyone in our business knows opening a new market is a lot harder than more stores in existing markets, as well as a lot more risk. Luckily, these new markets have done well for us, and what we're doing next year is, you know, on our path to profitability. We will be focusing on more stores in existing markets, and, you know, just not going as wide, going deeper where we know it works and feel really good and confident about the pipeline that we have. We also mentioned some work on the new formats. You know, we launched our pickup only kitchen a couple weeks ago in D.C., been doing exceptionally well. Gives us you know a little bit of a taste of things to come as we get closer to our automated kitchen, what we're calling the Infinite Kitchen. Next week, we're super excited, finally opening our first drive-through or our pull-through concept outside of Chicago. Some exciting stuff on the development front and we're just getting better at how we build these restaurants and feel really good about the real estate and the pipeline. Great. Thanks, John. Of course. Thank you. We go next now to Jon Tower of William Blair. Hi, good afternoon. You know, I wanna get back to the revenue guidance. Have you seen any weakening in the suburban store base? And then on the other side of the coin, I guess, are the urban stores rebounding still more or less as you anticipated or is that still sluggish? Because you would expect that given the improvement in office occupancy. Thank you, Matt. Yeah, I would say that some of the trends that we've seen at Sweetgreen have been a lot what other markets have seen. We've had faster same-store sales growth in the urban markets in the third quarter than suburban markets. Suburban markets basically have been flat, and urban markets have boomed at about 12%. Okay, thanks. Just looking at the comp guidance for the full year, I mean, it kind of implies a pretty wide range of comps for the fourth quarter. Could you be more specific in how October went same-store sales-wise, and what exactly are the embedded expectations for the fourth quarter comp? What I would say is reiterate, I believe what we said earlier, is October pretty much was in line with trends happening post Memorial Day. Think of it as kind of the summer, maybe the summer doldrums, and then the business peak around first of November. Okay. Got it. Thanks very much. Thank you. We go next now to John Glass at Morgan Stanley. Thanks. Thanks very much. I guess I'd like to again follow up on just sort of what you're seeing in terms of trends, mentioned, John. Is it possible to quantify what the impact of the store closures or reduced operating hours are? How meaningful was that versus just sort of reduced overall demand? I think last quarter, you have a lot of customer data, right, in terms of frequency bands of high frequency and low frequency customers. Is there any new insights from that data on what's changed? Is it your high frequency customers just dropped a visit or you're losing some new incremental newer customers? What does that tell you versus what you saw last quarter? Hey, John, good to hear from you. I'll answer the second part of the question. I'll let Mitch talk about the closures piece. In terms of the customer trends, it's actually interesting, and it speaks to our Intimacy at Scale playbook. If you think about Sweetgreen traditionally, you know, we would acquire our biggest acquisition lever was in our front lines. You know, the virality of our front lines and people, you know, working together and kind of walking by, driving by, coming in trying Sweetgreen for the first time, a lot through community efforts and the mobility that we saw. Throughout COVID, obviously, that really went away. We got very good at digital acquisition. You know, digital became a primary acquisition driver for us. To answer your question directly, we actually have seen very steady frequency trends and call it, like, how we measure frequency or, you know, annual spend or quarterly spend has actually remained pretty sticky. Actually has seen some increases as we've rolled out rewards and challenges. Really, it's been more from an acquisition perspective, and that's why I speak to this playbook around community. A lot of the things that we used to do pre-COVID around acquiring new customers were kind of shut off, shut down during COVID. It took us a little. You know, to be honest, we probably reacted a little bit slowly in bringing some of that back. As we brought it back recently, we've seen acquisition tick up. you know, retention flat, slightly up with rewards and challenges and, you know, we saw a kind of a drop in new customer acquisition, and we've seen that energize recently. Hey, John. Let me break the question about store closures into two general groups. We had a number of store outages caused by labor call-outs impacting things like line times, store operating hours, our back lines operating, and general R&M issues. Frankly, it's probably was the highest the company's ever experienced. In addition to that, we had three significant store closures highlighted, of course, by our Grand Central New York store that was closed for about half the quarter due to a landlord problem. Collectively, they all made up kind of a pretty significant number in the quarter. We have seen them begin to dissipate as we moved into the fourth quarter. Can I just follow up? One, can you quantify what that impact was? That's what I was trying to get at, is, you know, how big is that from a comp drag. As a follow-up, Mitch, unrelated follow-up. Last quarter, you talked about some of the Class of 2021, like in New York stores, you maybe if you did it again, you wouldn't have done it again just because, you know, those are coming down. Now we're talking about the Southeast. How is the class of 2021 in those New York stores? Does that continue to be a drag? Is it worse? Is it better? Now we're introducing a new element to some of these Southeast stores. I just want to understand what we talked about last quarter in terms of the New York stores being sort of softer to open. Okay, John. Let me say probably the closure number, to get specific, was probably in the neighborhood of $1.5 million in the quarter. In terms of the class of 2021, as I said, as an average class, it's on track to our aggregate metrics. Some of those New York stores that I called out have begun to grow and grow pretty significantly. For example, Spring and Hudson and the World Trade Center, really confining most of the kind of challenged market stores to that southeast corridor. Yeah, John, we've been. Yeah. How that class of 2021 has begun to ramp. It kind of speaks to, you know, the model that we have is just once customers try us, they end up being really sticky. Some stores, you know, hit right away, and some stores take a little bit longer. We know once we get people to try the food and give them a great experience, you know, the stores build. We've seen some nice improvement on that class of 2021. Thank you. Thank you. We go next now to Brian Bittner at Oppenheimer. Thanks. Just first question on pricing. Jonathan, you said in your prepared remarks that you've held your core menu price flat since the beginning of the year. I think your last price increase was in January. That's obviously very unique in this time we're in. Can you just elaborate on how you are strategically thinking about pricing moving into 2023, especially since you kind of said some costs have stiffened lately? And Mitch, can you just help us understand how we should expect the price factor in the model to play out in fourth quarter and throughout 2023? And then I have a follow-up. Yeah. You know, as I mentioned in my remarks, you know, we did hold price since January. I just wanna take a moment on the price value Sweetgreen offers because I think sometimes we all know this, but I just wanna reiterate. You know, Sweetgreen sources most of our vast majority of our food locally and from organic partners, really from some of the same sources that many of the best restaurants in the world, in the country use. On top of that, we make the food from scratch every single day. So you're getting a very, very high quality product for the price that you are paying. As our competitors have continued to take price, the relative value we offer, we believe is improving. The reason we haven't taken prices is partially our menu, you know, more plant-based, has had less commodity pressure, although we've seen some definite commodity pressure, and we do expect to see some more, much less than our competitors. We saw this as an opportunity to take some share. As more and more people take price, we do expect, you know, the environment for consumers to get more challenging. We, in a lot of ways, just saw an opportunity. You know, I talked about customer acquisition being an opportunity for us to hold our price and continue to take share. We do expect to have to take some price next year, but we're really judicious in how we use that. In this environment, wanna make sure that we offer the right value. One of the things that we've begun to see, and we think there is an opportunity in this environment, is a trade-down. Given the consumers that we have, and what they value from the places that they go, we see an opportunity for many people actually in this recessionary environment to be trading down for something like Sweetgreen. Brian, just following up on your question. There's no change in our pricing in the fourth quarter, so we'll look exactly like it did in the third. You are correct. Our last price move was the beginning of 2022, and that's the only price change for the year. Okay. I think I heard you correctly in your prepared remarks, so I'm sorry if this is off base, but I think you said a couple stores next year will have the Spyce technology. If that's the case, I'm just curious how much of these stores' product-making capabilities will actually be automated, the stores that are gonna have the Spyce technology. How important is the success of these stores in your overall thinking regarding the ability to scale this automation across your asset base moving forward? Yeah. Let me tell you a little bit about this technology and what we're calling this new format is the Infinite Kitchen. We're super excited about it. We've had a belief that automation can be transformative for the restaurant business and specifically our model. We see a lot of advantages, you know, talking about the customer. What the customer gets is the throughput gains are significant. We're talking about many times the throughput of our current line. On top of that, you know, some of the biggest attractors we have today are around accuracy, portioning. As you'd expect, the machine makes these things perfectly. We also are really excited about what this does for the team member experience. We spend a lot of time thinking about how we design this technology in the store really to be, you know, designed around elevating the human experience and that team member experience. Our team members are super excited about bringing this technology into their restaurants and working side by side. On top of that, it's definitely transformational from a model perspective, financial perspective. If you look at our restaurants, about half of our labor, our variable labor in the restaurants is production or assembly, and this Infinite Kitchen takes the majority of that. To be clear, you know, when I mentioned our Mount Vernon Pickup- Kitchen and why we're excited around that being kind of a test towards Infinite Kitchen because for us, the Infinite Kitchen, the automated assembly will prepare all orders. It's not, you know. In those stores, we don't envision a front line and a secondary make line. It would be 100% of our orders. We're excited for these pilots. It's early. You know, we gotta test these. We gotta not only test the technology, but also the customer and team member experience and perfect it. We're feeling pretty confident about it and think it'll be transformational for the brand and really for the industry. In 2024, we should see, you know, see us beginning to roll these out, given that they're successful next year. To be clear, these will be two new builds. They won't be retrofits. We'll be opening 2 new stores with this technology. Those two stores are in 2023, right? Correct. Okay. Thanks for that. Appreciate it, guys. Of course. We'll go next now to Jon Tower at Citigroup. Great. Thanks for taking the questions. Just a few, if I may. Curious, not a significant shift, but sequentially, digital revenue, digital mix as a percentage of revenue did slip, quarter-over-quarter and year-over-year. I know during the period, you ran the Summer of Rewards program at least for part of the quarter. I'm curious, if you could delve into what's happening here, maybe why it slipped, modestly in the period. Yeah. It's really the front line coming back. We see that as a good thing. I actually hope in future quarters you see more front line traffic 'cause that's a great customer acquisition driver for us. We actually expect and hope to see more customers coming, experiencing us through our front line and then converting them over to digital. It's really just, you know, it's a shift, and it's really the, you know, the denominator got bigger, but you have that that front line that's grown. I'll say it, we encourage that to happen. Okay. I hate to beat a dead horse, but going back to the unit growth discussion, I'm just curious, you know, it does seem like obviously the business is under quite a bit of pressure, right now. There's a number of different reasons for it. Why not consider concentrating some of the growth next year, on those markets that are going to be the most profitable, which might come at the expense of total, you know, new store growth rate, but knowing that those stores that you're opening are going to be more profitable, and/or, you know, higher volumes and more profitable than historically? Just curious to- Yeah. John- Get your take on the rate of growth? You hit it right on. how important it is to you. Earlier question when I talked about the pipeline and our focus on fewer markets, it's exactly that. You know, this year we went to a lot of new markets and, you know, tested out some demographics and areas that were in a lot of ways new to us in building the brand. In 2023, you'll see us, you know, focus much more on markets where we know it works, it's a proven model, really reducing the risk from our pipeline. What you said is exactly what is happening. Right. Does that translate into potentially a smaller number of stores relative to the- No. 20%+ growth rate? No. I'll tell you the honest truth is the pipeline was bigger, it was a bit bigger than that, and we're now kind of like focused it to be on, we're still hitting the numbers with that focus on those markets and areas where we have the high confidence. You could kinda get to the point that it would've maybe been bigger if we were willing to take more risk, but really focused on driving profitable growth right now. Got it. Then on the Infinite Kitchen stores that you're contemplating or going to open next year, are those gonna be digital only or are they also, you know, counter service frontline? We haven't really shared much on the experience, but we wanna make sure customers can order multiple different ways, and we know everybody doesn't wanna order digitally, so there will be some way for people to order in store. We think, you know, as I've mentioned today a number of times, that human experience and adding that sweet touch is super important. Even today, if you go into our new digital-only store, it's maybe deceiving to say digital only because there's a very high touch concierge experience when you go in and ability to order from a human as well. Imagine, you know, some sort of concierge ordering plus digital and kiosk being part of that experience. Got it. Last one for me. Commodity inflation in the quarter. I don't know if you guys have mentioned it on the call yet, but if you haven't, you mind giving me an update? No. What we really have seen is no significant change from the run rate throughout the whole year, where we expect it to average for the year approximately 6% in line with our price increase taken in January. Awesome. Thank you very much for the time. We'll go next now to Katherine Griffin of Bank of America. Hi. Thanks for taking my question. First, I just wanted to drill into this, the call-outs issue a little bit further. Number one, can you just remind us again sort of why the call-outs were higher in third quarter than you were expecting? As a follow-up to that, I believe Sweetgreen ran a 1-week long promotion for a $10 Harvest Bowl. I'm just curious, given some of the staffing challenges you're facing, why choose to do a promotion at that time? Yeah, I can take that. In terms of the staffing, what I'll say is during the quarter Q3, we had a lot of new team members. In our shift during the pandemic, our staffing mix moved to be more part-time than we were used to. What we saw is, you know, in this challenging labor environment and with more of a part-time mix, we saw more call-outs with that. In markets and stores with a higher full-time mix, we've seen that, you know, minimize significantly. There's a huge focus for us on how we shift the mix to be more full-time. You know, you want people where Sweetgreen is your primary place of work. When that happens and then there's a career, you know, you're more committed to the job. You know, our staffing levels are actually quite good. It's really just getting the mix right and getting some more tenure under our belts with these team members, as the world opens up and they get used to our omni-channel model, and the high volumes we do. You know, really the call-out issue, we believe will be really addressed by shifting the mix to be more full-time. In terms of the $10 promo, we've actually, like I said, we're staffed and we were ready. A lot of the challenges we were referring to were, you know, persisted throughout Q3 and a little bit in October. We feel like our operations have gotten to a much better place, getting into November, and we saw an opportunity to really just reengage some lapsed users and give people a little pulse of value in this environment. It's very early. We're still understanding the results, but it seems the results are very promising in terms of what it did for reengaging users and customer acquisition. Pretty excited about the promo and huge thanks to the whole team for making that happen. The one reason, you know, just we chose the Harvest Bowl. It's not only our best seller. We find that when people try the Harvest Bowl, they're most likely to come back. We call it our stickiest. It's the stickiest bowl we have. Not only did it have nice results last week, but we expect there to be some nice residual results coming from that promotion. Got it. Thank you. John, I just wanted to follow up on something. I wanna make sure I heard you right. I believe you said you expect there could be some trade down into Sweetgreen. Can you just talk about, number one, sort of where those customers would be coming from? Alternatively, what is the risk of customers that you know today trading out from Sweetgreen? Yeah, you know, we've seen it across the industry in these environments where, you know, casual dining, fine dining, people deciding, you know, they still want a high quality, healthy meal, but they maybe don't wanna spend $100 for dinner and they wanna spend, you know, $25 or $30 dinner for a couple. We've seen some opportunities in engaging customers there. Listen, in terms of consumers tightening their belts in this environment, we're expecting some of that. I mean, I think it's pretty clear we're in or entering some sort of recession. What's important for us is to really focus on our price value and what we offer. You know, we have a bowl under $10 in every market. We all, you know, our food is local and organic, made from scratch, really delicious, changes seasonally, and I think customers really value that. On top of that, we have a loyalty program being launched next year, which we think will be a huge driver for us. It's something that we've historically had for the, you know, the history of Sweetgreen and during the pandemic, we've been piloting new ways to improve it. We've essentially been running without a loyalty program. All to say in this recessionary environment, we think that'll be very important for us and a huge growth driver. Great. Thank you. Thank you. We go next now to Christopher Carril of RBC Capital. Hi, thanks for taking the questions. Just following up on the $10 Harvest Bowl promotion. I know you mentioned you're still evaluating the promotion, but do you anticipate leveraging price point promotions going forward, more just given the positive results you just mentioned, or was this just very targeted and tactical for this point in time? I'd say in this environment we're always testing things. We're always testing ways to drive traffic and just making sure that it's margin positive at the end of the day. We're evaluating the results. Seems like it worked out really well, and if it does, we'll play with different ways to acquire customers and just, you know, create some buzz in our markets. You know, I would expect us, if it proves out that it worked and the numbers come in as we expect, to do some more things like this. Got it. Okay. Then, Mitch, on just margins for the 4Q, it seems like just based on quickly plugging in the full year guidance commentary into our model, that would suggest a meaningful step down sequentially in margins from the 3Q to the 4Q, if I have that correct. I presume this is largely or due in part to seasonality, which we haven't really seen as much of over the past couple of years. Is there anything else we should think about with respect to 4Q margins specifically? Yeah. The fourth- quarter margin traditionally has been a low margin for Sweetgreen, largely built around the holiday schedule and wintertime. There's really nothing else going through it. Okay. Got it. Just last one. On the automated kitchen technology, Jonathan, you mentioned that the stores featuring this technology will be new builds for next year, but how are you thinking about opportunities to retrofit existing stores with the technology? Thanks. Yeah, we haven't gotten there yet. You know, the beauty I think for us at our scale and our size is, you know, I call it we're in this like Goldilocks size. We're big enough where we can invest in technology, you know, transformative technology like this, but small enough where, you know, most of our growth is in front of us. While I do think, you know, the technology could work in a retrofit, we're very well positioned in terms of focusing on new builds, and we believe that really is, you know, integrating this technology into the experience and thinking about it in a holistic way is the way we believe this will be deployed best, and we're really well positioned for that. All right, great. Thank you. Ladies and gentlemen, that is all the questions we have this afternoon. Mr. Neman, I'd like to turn things back to you for any closing comments. Thank you so much. Yeah, I just wanted to close up. You know, I've been spending a lot of time in the fields with our restaurants, with our restaurant leaders, meeting customers, talking to team members, and I gotta say, I have come back very energized about our Intimacy at Scale playbook. You know, we learned a lot throughout the pandemic, and we've tightened up our model in terms of how we operate. Now we're getting back to basics and how we connect to communities and how we add the sweet touch one customer at a time. We're really excited about the year ahead. We have a robust pipeline of NROs. We have two Infinite Kitchens planned, which I think are gonna be really interesting to learn from. We're gonna be introducing our loyalty program, and we have a lot of exciting stuff on the menu side, including some cool tests going on from a hearty perspective. All to say, you know, challenging environment, but excited about the progress we made and really excited about the prospects looking out into 2023 and beyond. Lastly, just wanna thank everyone for your time on today's call and for joining us on this journey. See you all soon. Thank you, Mr. Neman. Ladies and gentlemen, that will conclude Sweetgreen's Q3 2022 earnings conference call. We'd like to thank you all so much for joining us and wish you all a great remainder of your day. Goodbye.